Question

Splash Co. identifies the following activities that pertain to manufacturing overhead for its production of water polo balls, for each activity, identify an appropriate cost driver.

Activity Cost Driver
Materials handling
Machine setups
Factory machine maintenance
Factory supervision
Quality control
Cost Drivers:
1. Number of Purchase Orders
2. Number of Setups
3. Direct Labor Hours
4. Square Footage Occupied
5. Number of Requisitions
6. Number of Inspections
7. Machine Hours Used
8. Number of Employees

Answer 1

Materials handling = Number of Requisitions

Machine setups = Number of Setups

Factory machine maintenance = Machine Hours Used

Factory supervision = Number of Employees

Quality control = Number of Inspections

Explanation :

Cost drivers are activities that are directly related to the Overhead Concerned or those activities that drive the occurrence of an overheads.